Lithia Targets Service and Parts, Dealers Invest In Tech Funds, You Can’t Trade-In A Cybertruck

Paul J Daly  0:01  
Good morning. It is Tuesday, April 8. This is the automotive State of the Union. I'm Paul J Daly. This is Kyle Mountsier, back from the dead today. We're talking about lithium parts dealers investing in tech funds, and you can't trade in the cyber truck even if you want

Kyle Mountsier  0:16  
to, not even if you wanted to. You know some people you're stuck with it. I know some people. I know some people. We need

Paul J Daly  0:23  
two or three people be like, Look, just skip. We'll talk about that when we get to it. We'll just skip, how you feeling. Man, it was really weird having money sick because you don't get sick, you

Kyle Mountsier  0:31  
don't get I didn't really know we're human. I had, I had one of our team members be like, Oh, really, you're sick. That's new, is it? April 1? Yeah. First man yesterday was intense, definitely, you know, was like in in the bed the entire day. And I don't like that feeling because Mondays, Mondays are like my favorite day. I wake up ready to go, ready to get back after it, after a weekend. So, but team held down the fort, you and Michael crushed the pod. Good to go next. It's good

Paul J Daly  0:59  
to have you back. Listen, I not necessarily because you're sick, but with all of the things going on, we were been talking a lot about ASOTU CON, which is coming up here in just like under 40 days. And you know, we have a lot of hype and things around it, like we talk about the experience and the design and the swag and the scarves and all that and like. But the reality is, ASOTU CON is one of the most like pointed places to deal to figure out how to best deal with the things that are going on right now. Right now, the people who are actually moving and injecting new ideas and innovations into managing customer expectations through tariffs, fixed operations and parts, what you're doing in your sales, people with all different OEM experiences are going to be converging at a soda con. So I don't want that that to get lost in the mix, because we do such a good job on the design, so much so that I broke this shirt out today.

Kyle Mountsier  1:51  
Oh, you got the Oh no, crisis. Can win shirt? Oh, that's such a good shirt.

Paul J Daly  1:57  
This is, this is an OG shirt. And this was what happened when the pandemic started, it would like the whole mantra of ASOTU was when dealers band together, no crisis can win. And now you pair that with this more than cars mentality, that's that's kind of come together, and it had me so inspired. I actually, like, texted Rhett record, right? Because he was the OG general. I'm really working. I'm gonna try to get Rhett record out to ASOTU CON. I like, especially because Tom castriota can't make it, because he's going to be at the Italian nada, he's going to be an Italian I think, I think Rhett's a fair stand in for the voice of the dealers. Absolutely.

Kyle Mountsier  2:28  
Yeah. I mean, this is, I think, as as with any timing, it's always good to have the conversations that are right on hand. And when I look through the the topics and panel lists like, everything that we're going to be talking about doesn't matter which stage you hit. You're going to get real actionable things to take back to the store and and implement quickly.

Paul J Daly  2:50  
Yeah, right. Nathan. Nathan, our producers typing in no Christ can win shirts at ASOTU CON. I'm already ahead of you. I But he said, new design, maybe new design. I don't know if enough people have the OG design, though, right. Right might be, throw might be, might be throwback, but yeah, back actually telling you we'll definitely have no crisis. Can win T shirts. It's time. It's time to bring them back. It's been three, four years. All right, let's get into some news. By the did we put a soda con graphic up? Do we do? Did we miss something? Was I supposed to? I don't know, no. I mean, I just had it there. I just had it there in case

Unknown Speaker  3:18  
I want to flash it up. But

Paul J Daly  3:19  
you guys were having such aggressive I want to thank our friends at Red. Friends at Reynolds, Reynolds and goo goo for being presenting sponsors this year and making it happen. Put the other graphic up too. Everybody knows them, loves them. The best conversations in automotive happen here. There's a picture of the hotel. That's a nice hotel. You've been in nice hotels. You've been to networking parties, but what you haven't done is talk to the people how we're dealing with these situations right now, in mass, in person, just saying, All right, let's, let's talk about some news. We're not, I don't even think we're gonna mention the T word for the rest of this episode. I think that that's kind

Kyle Mountsier  3:55  
of mind boggling. It is

Paul J Daly  3:56  
in the morning, but, but like, it's good, it's good facing under performance in its service and parts growth. Lithium motors is turning inward, challenging its front line teams to raise the bar and reclaim momentum in this key revenue area. Fixed stops their q4 same store service and parts revenue grew by 3.4% but falling short of their peers, like Sonic, which grew 10% and Penske 6.2% CEO Brian De Boer emphasized it's not a technician shortage that's causing this, but a mindset issue among service advisors and managers when, when the CEO starts saying that you started to be like, just stand up no straighter. Company is expanding its partners group program to include department managers offering stock incentives tied to higher performance standards. Coo Adam Chamberlain sees the after sales department as a major 2025, growth driver, but warns current operations sacrifice customer pay for warranty work. Brian DeBoer, CEO again, said, quote, there's been a. Way Too soft of management and lip service, 60 to 90 days is our new mantra that sounds like he's ready to go

Kyle Mountsier  5:06  
look, first of all, to come out and say this in a public space is, wow, bold, bold, but, but look, service and parts is the engine that keeps the business running when it comes to the entire operation, right? It doesn't matter if you're talking about used cars, you're talking about customer pay, customer pay, turning in service to sales opportunities. It is the fixed ops department that I would say is the like. It is the heart and soul of an automotive franchise dealership. And so if you feel at all like the entire organization is falling short. That's a great place to focus on, and yes, it can have an absolutely massive shift in your profitability. You know some of the best dealerships that I know like you, you look at how many people you get to touch in a service department as potentially sales department every single month, like the impact. It's brand

Paul J Daly  6:04  
build, brand awareness, customer experience, all the things. Had a little time to spend with Brian A couple years ago at the auto Team America event. And we actually, I interviewed him while he was playing a game of pinball. It was amazing. It was fun. But the level of mental acuity that this man has is super impressive. And I'm I'm like, if we're betting right now, we're not really better as you and I, but if I was a betting man, I would bet that in the next quarter there's going to be a massive turnaround. And that this, they have a great organization with some great leadership, and I think the focus on it, you know what? What gets focused on gets fixed. And he's obviously told the whole world, at the public, at the public, and that's he's like, we're focusing on this group of managers right here. Got to shape up if you're in that group, right? Yeah, yep. So there you go, coming in. Hey, nice little chime in from our friend Doug flesson In the comments, fixed stops used to be and should be at least 80% of the dealer's profitability. Exclamation point, if you're just listening, let's get back there. We agree with you. Doug, he also says Happy, happy episode, 1012

Kyle Mountsier  7:05  
on our way, on our way to 2000 that's a good number. That is

Paul J Daly  7:08  
speaking of good numbers. Whoa, two $40 million is a really good number. So venture firm FM capital closed its fourth fund at 240 million, almost a quarter of a billion. He's starting to throw that B throw that b word around, aiming to fuel retail and mobility ability, tech across the auto industry, with major backing from dealership groups. Yeah, the funds surpassed 200 million. It's $200 million target, despite a tough venture capital environment currently, guess not in auto investments will target AI, fleet tech, autonomy, connectivity and energy transition, 125 investors participated total, including 56 dealership groups representing over 1100 stores. Holman and Cox automotive returned as key backers for this round as well. Chase Frazier, our good friend, you'll meet him. Where? Where are you going to meet? Chase at a sou con, of course, managing partner of FM capital said, quote, dealerships really respect entrepreneurs, because they are entrepreneurs themselves. They want to get involved. They want to mentor some of these entrepreneurs. They want to test their products. They want to give them feedback, because who knows better than the user?

Kyle Mountsier  8:15  
That's right. Look, first of all, kudos to FM capital. The whole team there. Chase is such a good friend. He is going to be at ASOTU CON, both being a judge on pitch tank, but also he's going to be sitting in on an extended conversation with Steve Greenfield, Bill Karis, a couple others, just simply on what the landscape of investment in auto, retail, tech and mobility right now is, and that's going to be important for dealers to understand. It's going to be important for industry partners to understand, like, where's the money flowing and what's what's incentivizing people to kind of, like, buy into some of this stuff. But firsthand, you know, we, we took, you know, dealer funds as as an as an investment when we started, and I can tell you, like, being close to the dealer is super important. And I think is important for tech partners. It's important for these venture funds. It's important for us because that is, that's the end user, that's the person that gets to tell you whether or not it's working on the front lines and having an impact. So I love this fund. I love this fund, you know, auto tech, VC,

Paul J Daly  9:19  
those three on a stage together, it's gonna be so good. Bill carecy Greenfield and chase Frazier, come on. Let's get out of here. Let's go listen. And I think this is another great reason that if you are a dealer or a GM who is paying attention to what's going on in the future and trying to find those solutions, and you like trying things, you like seeing what's over the horizon, first that's the panel to be at. And ASOTU CON is a place where you can continue those conversations with all the other dealers and CMOs and CTOs and coos that think the same way. You got to be around the people first if you want to get, you know, the first things there, and if you have some money to invest,

Kyle Mountsier  9:57  
those are the guys you want to be the guys. You'd want to get next to That's right, the truth, speaking

Paul J Daly  10:02  
of getting next to pizza, oh, we're getting away from people. Lot of that going on. That

Kyle Mountsier  10:09  
Tesla cybertruck is facing a brand new problem. Its maker doesn't even want it back. Owners looking to trade in their trucks are supposedly getting turned away exposing deep patrol for the high profile pickup, Teslas reportedly refusing to accept cyber trucks as trade in citing resale struggles and declining demand. They also have a backlog of nearly 220 400 unsold units worth about 200 million bucks, with used values down 55% year over year, 13% over the last three months and 6% over the last month, so that thing has taken a beating. Some frustrated owners are even resorting to trying to use lemon laws to offload the vehicle. Other dealers are actually low balling owners avoiding cyber trucks altogether due to the market instability. Here's here it is. Here it is. A cyber truck recall this year revealed that only 46,000 of the vehicles have been delivered. That's

Paul J Daly  11:06  
how the number finally got out. It was the recall. Million pre orders. 46,000 delivered. 2400 sitting in a lot unsold. I mean, Tesla can't catch a break right now. Without a doubt, I think that these cyber trucks, I've driven them, like they're it's an amazing vehicle, right? It's truly an amazing vehicle. And I think once the political heat dies down, and I think it will, I think in the used market, these trucks are just going to become the value vehicle, right? I bought this f1 50 lightning. I had it was 100 grand brand new. I bought it for $45,000 with 23,000 miles on it, right? And I think the cybertruck is probably going to experience the same thing it already is, obviously, with a 55% drop in value. Granted, some of that 55% is a little stark, because when they first came out, the used values were very, very high in the very beginning, right? Used value of cybertruck could have been double MSRP, but still, I think it's gonna become a value truck. It's gonna be less of a stigma in some of the country to drive one. So I think it's gonna come back. But I think there are a lot of dealers that know what to do with these trucks.

Kyle Mountsier  12:11  
So that's the trick. I think, I think that, like, this is still and Jimmy Douglas at plugs, kind of like his calling card is they're still finding the right dealer to have these cars, right? We know some of them, EV autos. Alex Lawrence, recharged, you know the if the right dealer, whether it be a used car dealer, franchise dealer has these cars, knows how to market them, knows how to how to get them to the right consumer. The consumer is taking interest in EVs from them. They're going to be fine. So, you know, this is, this is clearly like an issue from Tesla's perspective, but I think the retail industry can handle

Paul J Daly  12:48  
it. I think so too. You know, I was driving today, like driving to work, and I've been charging out front, and I realized I have not been to a gas station in quite a while. That's staggering. And it is awesome. It really is great not having to stop there, like, because I'm always running late, you know me, I'm always right on the line, and I'm like, and actually having an EV makes you pay more attention to how much you know, charge you have so interesting, right? More than your gas, like, without a doubt, because with gas, you're like, oh, I'll just get it next forever. And then before you know, you're like, nope. Now this is the time I have to get gas. It doesn't happen. Yeah, I don't know lot going on. Listen, folks, no crisis can win when dealers band together. No crisis can win. Be with all those other dealers at ASOTU CON. Go to ASOTU CON com. Get your tickets. Be with us. Fix your problems. It'll be fun, everybody.

Transcribed by https://otter.ai

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